CSX provides rail-based freight and intermodal transportation services through a network of 30 terminals over its 19,500 route mile rail network serving 23 US states east of the Mississippi River, the District of Columbia, and the provinces of Ontario and Quebec in Canada. Founded in 1978, CSX is headquartered in Jacksonville, Florida. CSX (CSX) comes in at #9 in our countdown of the “Top 20 Dividend Growth Stocks.”
CSX Corp (CSX) is ‘Second Class,’ failing 2 of 5 Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 19 years, making it a Dividend Contender 10+. We consider CSX to be a Growth stock.
GROWTH: CSX’s 5-year average dividend growth rate is 8.8%, below the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 46% per year for the last 5 years versus the dividend universe at 8.3%, so CSX is performing very well.
INCOME: CSX’s current dividend yield is 1.17%, less than half of the average at 2.65%.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. CSX has a DCR of 5.3 which is very good, more than double the minimum of 2.
VALUATION: The price at time of analysis was $88.55, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $56.92. The S&P500’s average PE ratio is 38.42, versus CSX’s PE ratio of 24.65, well below the S&P 500 average PE, indicating strong value, but is there a reason for the low PE? Our ‘Value Rating’ for CSX Corp is 1.5 out of 5.0, meaning that both PS and PE indicate the stock is moderately expensive, compared to other dividend stocks available.
TIMING: Historical Yield and PE tell us that CSX has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives CSX a ‘Quality Rating’ of 3.8 (out of 5), versus the average of 2.7 for this month’s dividend universe.
TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in CSX Corp was 18.37% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, CSX is doing better than the market with dividends reinvested.
Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate CSX Corp a ‘B+.’
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